Frankfurt's Dax 30 is definitely the star index of the year…
It started the year at 13,126 moved to a frightening low of 8,158 in March and then recovered to over 13,200 in July.
This means, the German index has gone positive for the year.
And I believe this is going to continue in the next couple of months.
Right now, investors are feeling super optimistic about the index as it is continuing to make new highs for the year.
In this article, I'll share with you three reasons why I expect the Dax 30 index to rally another 37%.
Before we begin, I'd like to quickly share with you what Andre Koppers, a portfolio manager at Oberbanscheidt & Cie, said.
“The DAX is now flat for the year because in the long run it does matter that Germany and its economy should come out of the crisis better than many others,”
A 750 Billion euro recovery plan to the rescue
The EU leaders last week, finally agreed to a 750 billion euro Covid-19 rescue package, after a ton of negotiations in Brussels.
The main goal of the package is to tackle the economic and social havoc that the coronavirus pandemic caused.
The EU deal will be paid out in two main ways.
390 Billion euros will be in the form of grants. And 360 billion euros will be for low interest rate loans.
We then saw the Dax react to this news, as its price rallied up to a new five months high.
This took the exchange into positive territory in 2020.
We aren’t 100% sure why the Dax reacted to the EU news, but I have a suspicion.
You see, there are a number of companies on the Dax exchange that form a big part in Europe’s economy, which will benefit from the EU funds.
I’m talking about Daimler, Volkswagen, Bayer, BMW, Deutsche Bank and Siemans. The EU news brought about optimism in investors once again, which got them investing in these companies sending up the price.
In fact, last week we saw Volkswagen move up 2.06% along with its competitors, including BMW and Daimler.
Germany’s manufacturing is picking up
The Purchasing Managers Index results are out.
In short, the PMI is an economic indicator compiled by the IHS Market.
It shows the levels of manufacturing activity and gives an overview of the health of the country’s economy.
Any reading below or above 50 signals contraction or expansion.
In May, Germany’s manufacturing was at an abysmal 36.6 PMI.
Fortunately, on Wednesday, we saw an improvement where Germany’s manufacturing levels came out at 45.2. This also beat the expectations of 44.6.
And so, we’re seeing positive signs with Germany’s economy, sentiment and with top German companies.
And as always, my charts are agreeing with the positive factors.
My Cup and Handle pattern shows a 37% rally with the Dax
Above, is the daily price chart of the Dax 30 (German index).
Since 20 February up ‘till 19 July, it’s been moving in a breakout pattern I use to send trade ideas to Red Hot Storm Traders
It’s called a Cup and Handle formation (Shaded area).
This pattern is characterised by three main parts namely:
• The cup - big rounding bottom.
• The handle – small rounding bottom.
• The brim level - high price.
Last week, the price broke above the brim level at 13,130.
This attracted even more buying which sent the price up. And based on the factors I’ve mentioned today, the Dax is set to rally further.
We’ll use the High-Low calculation, to find the next price target.
Here's the calculation:
Price Target = (High - Low) + High
= (13,130 – 8,158) + 13,130
The next target for the Dax 30 to hit this year is at 18,102.
550 people ALREADY have my number in their address book - and since I started SMS’ing them (Since the COVID-19 Lockdown), they've made R8,848 profit.
Now it's YOUR turn to see
how much you could make
Here’s two ways to profit from the 37% rally
First, I’ll buy the Dax 30 CFDs and hold it until it hits the price target of 18,102.
Second, I’m going to wait for Trader X to send out international trade ideas from stocks listed on the German exchange. I’m talking about Daimler, Adidas, BMW and even Volkswagen.
Analyst, Red Hot Storm Trader
P.S: Trader X has recently closed his Prosbient Sat Media German trade for a 16.34% profit…